FRM Part I · FRM Exam Part I · Fundamentals of Probability
A risk analyst states that events A and B are independent. P(A) = 0.30 and P(B) = 0.40. Which of the following is the value of P(A or B)?
The probability is 0.58. With independence the joint probability is 0.30 x 0.40 = 0.12, and the union is 0.30 + 0.40 - 0.12 = 0.58. Simply adding the two probabilities gives 0.70, which double counts the overlap.
- A0.70
- B0.58Correct
- C0.12
- D0.52
Explanation
For independent events P(A and B) = 0.30 x 0.40 = 0.12. P(A or B) = 0.30 + 0.40 - 0.12 = 0.58. The value 0.70 ignores the overlap, and 0.12 is only the joint probability.
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